Stevens Textile Corporations 2016 financial statements are s

Stevens Textile Corporation\'s 2016 financial statements are shown below: Balance Sheet as of December 31, 2016 (Thousands of Dollars) Cash $ 1,080 Accounts payable $ 4,320 Receivables 6,480 Accruals 2,880 Inventories 9,000 Line of credit 0 Total current assets $16,560 Notes payable 2,100 Net fixed assets 12,600 Total current liabilities $ 9,300 Mortgage bonds 3,500 Common stock 3,500 Retained earnings 12,860 Total assets $29,160 Total liabilities and equity $29,160 Income Statement for January 1 - December 31, 2016 (Thousands of Dollars) Sales $36,000 Operating costs 32,440 Earnings before interest and taxes $ 3,560 Interest 460 Pre-tax earnings $ 3,100 Taxes (40%) 1,240 Net income $ 1,860 Dividends (45%) $ 837 Addition to retained earnings $ 1,023 Suppose 2017 sales are projected to increase by 10% over 2016 sales. Use the forecasted financial statement method to forecast a balance sheet and income statement for December 31, 2017. The interest rate on all debt is 8%, and cash earns no interest income. Assume that all additional debt in the form of a line of credit is added at the end of the year, which means that you should base the forecasted interest expense on the balance of debt at the beginning of the year. Use the forecasted income statement to determine the addition to retained earnings. Assume that the company was operating at full capacity in 2016, that it cannot sell off any of its fixed assets, and that any required financing will be borrowed as a line of credit. Also, assume that assets, spontaneous liabilities, and operating costs are expected to increase by the same percentage as sales. Determine the additional funds needed. Round your answers to the nearest dollar. Do not round intermediate calculations. Total assets $ AFN $ What is the resulting total forecasted amount of the line of credit? Round your answer to the nearest dollar. Do not round intermediate calculations. Line of credit $

Solution

BALANCE SHEET 2016 Basis of projection 2017 Cash 1080 3% of sales 1188 Accounts receivable 6480 18% of sales 7128 Inventory 9000 25% of sales 9900 Current assets 16560 18216 Net fixed assets 12600 35% of sales 13860 TOTAL ASSETS 29160 32076 Accounts payable 4320 12% of sales 4752 Accruals 2880 8% of sales 3168 Notes payable 2100 2100 Current liabilities 9300 10020 Mortgage bonds 3500 3500 Long term debt 3500 3500 Common equity 12860 14000 29160 =+1140 31020 EFN-Forecasted Line of credit 1056 INCOME STATEMENT Sales 36000 +10% 39600 Operating costs 32440 90.111111% of sales 35684 EBIT 3560 3916 Interest 460 460 Pre-tax earnings 3100 3456 Taxes (40%) 1240 1382 Net Income 1860 2074 Dividend (45%) 837 933 Retained earnings 1023 1140